January
14,
2008


Where
the
Money
Is
by
Clint
Greenleaf

The
famed
bank
robber
Willie
Sutton
was
reported
to
have
said,
"I
robbed
banks
because

that's
where
the
money
is."
The
quote
has
survived,
because
although
it's
not
a
fair
way
to

make
money,
it
is
accurate.
Robbers
and
villains
have
been
using
this
tactic
since
banks

were
invented.

On
11
Jan
08,
the
city
of
Cleveland,
OH,
made
history
by
suing
21
banks
for
losses
that
some

city
residents
have
suffered
in
the
subprime
crisis.
The
basis
of
the
lawsuit
is
that,
by

providing
money
to
borrowers
that
was
not
subsequently
paid
back,
the
banks
created
a

"public
nuisance,"
harming
the
entire
city.
And
Cleveland
is
not
targeting
just
the
banks

that
made
the
loans,
but
also
the
investment
banks
who
bought
the
mortgages
in
bulk
(a

standard
practice)
and
don't
even
have
lending
arms.
In
an
attempt
to
justify
the
suits,

Cleveland's
mayor
Frank
Jackson
equated
home
loans
to
drugs
‐‐
implying
that
banks
were

no
better
than
drug
dealers.
If
you
listen
carefully,
you
can
hear
bright,
financially
minded

people
asking
"Who
is
John
Galt?"

I
grew
up
in
Cleveland
and
spent
most
of
my
first
25
years
living
and
(more
often)
dying

with
the
Browns,
Indians
and
Cavs.
I
love
the
city,
I
started
my
business
in
Cleveland,
and

most
of
my
family
and
friends
still
live
there.

But
my
love
for
Cleveland
is
not
blind.
The
taxes
in
Ohio
and
Cleveland
have
been
on
the

rise
for
the
past
40
years,
and
they
helped
drive
my
business
out
of
town
to
Austin,
TX.
The

property
values
dropped,
the
manufacturing
jobs
left
and
little
new
came
to
town.
There

was
the
famed
"brain
drain"
where
smart
people
left
town
for
other
cities
that
would
feed

their
entrepreneurial
spirit.
(For
more
info
on
this,
read
Richard
Florida's
The
Rise
of
the

Creative
Class.)

Certainly,
some
aspects
of
Cleveland's
decline
were
out
of
its
control.
But
many
more

weren't—and
the
sad
state
of
that
once‐great
city
must
be
placed
firmly
at
the
feet
of
its

astonishingly
poor
political
leaders.
Indeed,
Mayor
Jackson
is
only
one
of
a
long
list
of

career
Cleveland
politicos
that
exhibit
little,
if
any,
economic
sensibility.


Yet
even
by
Cleveland's
standards,
this
lawsuit
is
breathtaking.
Sure,
the
Mayor
is
just

playing
politics
by
pandering
to
his
citizens
and
telling
them
that
their
woes
are
not
at
all

their
fault.
(And
indeed
many
are
not.)
But
apparently
no
thought
has
been
given
to
the

broader
ramifications
of
the
theory
the
Mayor
is
advancing
here.
Under
his
logic,
a

depositor
in
a
local
Savings
and
Loan
would
be
liable
for
facilitating
that
institutions
failed

loans.
Apparently,
the
Mayor
believes
that
local
mortgage
lenders
really
wanted
to
pay
tens

of
millions
of
dollars
in
exchange
for
a
host
of
foreclosure
actions,
and
that
institutions
like

Bank
of
America
really
wanted
to
purchase
billions
of
dollars
in
mortgage
securities
that

they
anticipated
having
to
write
down
later.
Anyone
who
knows
the
first
thing
about

mortgage
lending
knows
that
no
lender
wants
to
foreclose
on
a
property.


More
significantly,
from
now
on,
what
bank
in
its
right
mind
would
want
to
lend
money
in

Cleveland?
Indeed,
one
can
soon
imagine
the
day
when
this
Mayor
or
his
successor
will

seek
to
sue
these
very
same
banks
for
refusing
to
lend
to
Cleveland
residents.
And
who

loses?
Middle‐class
Cleveland
residents
who
can
no
longer
access
loans.
Mayor
Jackson
may

earn
short‐term
political
points
with
his
constituents
by
equating
mortgages
to
drugs,
but

in
future
years,
those
same
constituents
might
miss
having
access
to
home
ownership.

Mayor
Jackson
is
going
after
the
banks
because
they
have
money,
not
because
they
are
at

fault.
Ignorance
of
economics
has
consequences,
and
when
the
ignorant
happen
also
to
be

political
leaders,
the
consequences
can
be
severe.
Just
look
at
Cleveland.